Wilmot Reed Hastings, Jr. Date of Birth: October 8, 1960 Birthplace: Boston, Massachusetts Education: BA 1983 - Bowdoin College MS 1988 - Stanford University
Director Facebook, Inc. Chairman of the Board DreamBoxLearning, In.1991 - N/A Former Chief Executive Officer, President and Director Pure Atria Corporation1997- Present Founder, Chairman, Chief Executive Officer, President and Member of Stock Option Committee Netflix, Inc. Lead Independent Director, Member of Governance & Nominating Committee, Member of Compensation Committee and Member of Finance Committee Microsoft Corporation Director Startup America Partnership
Introduction:
Netflix (NASDAQ: NFLX), the largest DVD-by-mail service, has offered flat-rate movie rental to customers in the United States for the past decade. Reed Hastings, co-founder and CEO, has since expanded his original company into two elite providers of DVD-by-mail and on-demand streaming media in the United States, Canada and Latin America. Combined, Netflix and its subsidiary Qwikster offer a comprehensive subscription-based rental service that includes movies, TV shows, streaming internet content, and the latest video games.
Appeal:
There are several reasons why we chose Reed Hastings for this project. Even from a non-business perspective, he has proven to be a uniquely intriguing figure. As an educational philanthropist who participated in both the Marine Corps and the Peace Corps, Hastings is an exciting, extroverted person who enjoys adventure and giving to others. He is also heavily involved in politics and makes large charitable contributions on a regular basis. As an entrepreneur, Hastings has a long, impressive history of success. However, he has been heavily criticized in 2011 for his drastic business decisions involving Netflix and Qwikster. Watching such a prominent industry, company, and CEO rapidly adapt to uncertainty in real time has arguably made this project much more interesting for our group.
Personality:
Reed Hasting is a powerful, self driven, ambitious entrepreneur that has turned a small idea into a billion dollar company. His motto, “do a few things well” has led him to great achievements today (Yager). Reed takes a different approach to success by being aware of the importance of time. As an entrepreneur, Reed had to be precise when choosing the right timing to start his company and give the world a new option of renting movies. Reed is a high achiever and believes Netflix will continue to grow as years go on. Reed also shows high self-efficacy by his confidence in his company. He is not threatened by competing companies, such as, Apple, Amazon, and Google, because they are such big companies that offer many broad features. Reed believes that because Netflix only focuses on DVDs and online streaming, they will always have an upper hand and offer customers better service (Reed).
As a philanthropist, he is concerned with helping others. Reed served as the president of California’s State Board of Education and now works with Digital Promise, an organization striving to build an education technology market. Their goal is to boost student achievement in the U.S. by integrating technology in and out of the classrooms (Arne). Reed’s goal is to dedicate his time and efforts to serve the community by concentrating on education K-12 (Education).
In using the “Big Five” personality traits, Reed encompasses relatively high forms of all five traits. These traits include emotional stability, extraversion, openness, agreeableness, and conscientiousness. As the CEO of Netflix, it is important to exemplify these behaviors at work for the success of his company. According to the “Big Five” traits, emotional stability is a quality needed to be a top performer in customer service. Extroversion is also a crucial trait to have when being in management because it measures a person’s attitude with society. Reed is a strong extrovert who inspires people to follow a good idea when they see one. In addition, Reed’s openness to experience is illustrated by his life story. He volunteered in the Peace Corps and Marine Corps, which show that he has a passion to serve others while having the openness to leave his comfort zone and experience new cultures (Yager). Reed’s conscientiousness is measured through his decision making every day. He is aware that in business, there is a buildup of momentum for a new idea and if he does not act quick enough it could be easily gone. He is very conscious of time, technology, and the way society works. Reed also shows to have agreeableness through his ongoing effort to serve others. He continues to work to better education. These traits make Reed a great leader and contribute to the growth of his company.
Reed’s personality characteristics illustrate that he has internal locus of control. Reed believes he can control what happens to him and his company if he continues to make intelligent decisions. He knows that in the science of business it is crucial to always think ahead and be conscious of the importance of time (Reed). Reed also demonstrates to be a high self monitor. After the rise in prices for membership, Reed was attacked by many customers who felt betrayed and lied to because of his lack of communication. Judging by the situation, Reed knew he had to make amends and apologize to his customers. He took the initiative to send out personalized apology letters to each of their customers and also made a video of apology for everyone to watch (Explanation).
Values:
Over the years, Reed Hastings has implicitly identified several of his personal values through his life decisions. After college, he demonstrated how important national security and service are to him by serving in the Marine Corps. Although the Marine Corps ultimately did not suit his skeptical nature, Hastings was still “very interested in serving” and enlisted in the Peace Corps to help accomplish their mission of promoting world peace and friendship (Zipkin).
Just two years removed from graduate school, Hastings founded Pure Software in 1991. It grew into one of the top 50 software companies in the world, but the young CEO was not satisfied with what he called his “mediocre” performance (Yager). After selling the company for $750 million, Hastings demonstrated his extreme ambition by reinvesting the money in an attempt to revolutionize the movie rental industry.
As Netflix CEO, Hastings values responsibility and honesty. This is especially evident in his public response to the negative customer feedback in the third quarter of 2011. After Netflix subscribers expressed their dissatisfaction and confusion with the introduction of Qwikster, Hastings took personal responsibility for failing to explain the decision earlier. He apologized for what many Netflix members felt was a breach of trust, and committed himself to correcting the problem.
Motivation:
“That restless, slightly paranoid attitude, combined with a Steve Jobs-like perfectionist streak, is what sets Hastings apart, he's a hero of mine, as a human and as a leader, Reed was ahead on the technology curve with the DVD and completely changed an industry."-Kleiner Perkins partner John Doerr
In 1991, long before Netflix and when Blockbuster was still the industry leader, Reed Hastings founded Pure Software. His first startup was based on a debugging tool for engineers, managed to double its revenue every year, and went public in 1995. Hastings quickly went from being a rookie entrepreneur to being a CEO and having to learn management skills on the fly. Hastings said he was “underprepared for the complexities and personalities” involved in such a high-level management position (Sauer, 2010). In 1997, Pure Software was acquired by Rational Software for $750 million, which provided Hastings with the capital to start Netflix, the pioneer DVD rental service.
At its inception, Netflix was quickly dismissed by skeptical critics. In January 2005, Wedbush Securities stock analyst Michael Pachter called Netflix a "worthless piece of crap." He put a price target of $3 on the stock, at the time trading around $11. The doubters thought Blockbuster, Wal-Mart (WMT), or Amazon (AMZN), with their economies of scale and established customer bases, would simply destroy Netflix" (Copeland, 2010).
Hastings used this comment to motivate himself and others at Netflix, “A black poster emblazoned with Pachter's photo and his "piece of crap" comment hangs outside a kitchen at Netflix today.” (Copeland, 2010).
Hastings’ personality has helped to make him a very successful Silicon Valley entrepreneur. He has been called a visionary, someone who thinks about the future and is capable of making tough decisions. Hastings keeps the decline of AOL as a reminder to be willing to adapt before it’s too late, “Hastings knows a similar fate could befall Netflix if it couldn’t find a way to shift its 10 million subscribers from DVD to streaming”. (Copeland, 2010).
Hastings also has an ambitious focus for the long-term goal of Netflix, which shows he and his company have a high need for achievement. Hastings also has a high-risk threshold, as he did something that most CEOs would not do, write a letter of apology to its subscribers. He wrote this letter after coming under intense fire for raising Netflix subscription prices and some say that he should have done this earlier. His decision to raise prices and split up the company run parallel with what he feels is in the best interest for Netflix; to become a company that transforms the entertainment industry, like HBO, “We want to be ready when video-on-demand happens. That’s why the company is Netflix, not DVD-by-mail” (Sauer, 2010).
The Netflix corporate feel is different than most other companies. The corporate workplace structure reflects Hastings’ leadership style, as well as the values personal motivators that have helped make him so successful. Hastings and Netflix made public a PowerPoint presentation entitled “Freedom and Responsibility Culture”, which describes the corporate policies including no vacation policy, and lots of employee freedom and responsibility. This atmosphere tend to result in very hard-working employees with a high sense of affective commitment to the organization.
Hastings obviously has a high need for achievement, a main need in McClelland's Theory, being a successful entrepreneur with his first company Pure Software, as well as his most successful company, Netflix. However, Hastings is not like the typical high achiever with the desire for moderate risk, as he has taken many risks, most recently being the decision to split the DVD and Streaming sections of Netflix into separate companies. Hastings single-handedly changed the movie and entertainment industry with the rapid rise of Netflix, driving Blockbuster and similar stores out of business. He is aware that the future is in streaming, even if the DVD-by-mail section of Netflix is still extremely successful. Hastings' decision and apology statements have come under intense scrutiny in the media, but time will tell if this was the right decision to make.
At Netflix, Hastings and his executive staff motivate employees by using Theory Y to manage employees. Netflix expects its employees to work hard, give over 100% and strive to succeed as much as they can. Netflix also does not put an emphasis on job titles (except for at the top), and it does not give employees a finite number of vacation days. This gives an incredible amount of trust and responsibility to the employee, further promoting Growth, in Alderfer's ERG Theory.
Leadership, Culture, Ethics [VIDEO]:
Decisions, Power, Performance [VIDEO]:
What you don't know about Reed:
In an interview for 60 Minutes, Reed Hastings claimed that he was inspired to start his company after misplacing a VHS that he had rented (Yager). He was too afraid to tell his wife about the lost tape, six weeks passed, and he was charged a $40 late fee. It was later that week while on his way to the gym that the thought occurred to him: movie rental companies should act like gyms- charge consumers a monthly fee that would allow them to use a given movie for however long they desired. As the DVD grew in popularity, so did Hastings' confidence in his idea. He believed he could capitalize on the compact size of the media coupled with his ‘gym membership’ idea to create a completely new kind of company: Netflix.
Hastings on entrepreneurship: “Once you have hitchhiked across Africa with ten bucks in your pocket, starting a business doesn’t seem too intimidating” (Boyle 2007).
Netflix and Qwikster were the subject of a recent Saturday Night Live parody sketch. Jason Sudeikis played the part of Reed Hastings.
Sauer, P. (Interviewer) & Hastings, R. (Interviewee). (2005, December 1). How I did it: Reed Hastings, Netflix. [Interview transcript]. Inc. Magazine. Retrieved October 6, 2011 from http://www.inc.com/magazine/20051201/qa-hastings.html
Yager, J. (2006, December 13). Untitled [Television series episode]. 60 minutes. New York, NY: CBS Corporation. Retrieved October 6, 2011 from YouTube at http://www.youtube.com/watch?v=K3GzO2_NFfQ
Zipkin, A. (Interviewer) & Hastings, R. (Interviewee). (2006, December 17). Out of Africa, onto the web. The New York Times. Retrieved October 6, 2011 from http://www.nytimes.com/2006/12/17/jobs/17boss.html
Wilmot Reed Hastings, Jr.
Date of Birth: October 8, 1960
Birthplace: Boston, Massachusetts
Education: BA 1983 - Bowdoin College
MS 1988 - Stanford University
Director
Facebook, Inc.
Chairman of the Board
DreamBoxLearning, In. 1991 - N/A
Former Chief Executive Officer, President and Director
Pure Atria Corporation 1997- Present
Founder, Chairman, Chief Executive Officer, President and Member of Stock Option Committee
Netflix, Inc.
Lead Independent Director, Member of Governance & Nominating Committee, Member of Compensation Committee and Member of Finance Committee
Microsoft Corporation
Director
Startup America Partnership
Introduction:
Netflix (NASDAQ: NFLX), the largest DVD-by-mail service, has offered flat-rate movie rental to customers in the United States for the past decade. Reed Hastings, co-founder and CEO, has since expanded his original company into two elite providers of DVD-by-mail and on-demand streaming media in the United States, Canada and Latin America. Combined, Netflix and its subsidiary Qwikster offer a comprehensive subscription-based rental service that includes movies, TV shows, streaming internet content, and the latest video games.
Appeal:
There are several reasons why we chose Reed Hastings for this project. Even from a non-business perspective, he has proven to be a uniquely intriguing figure. As an educational philanthropist who participated in both the Marine Corps and the Peace Corps, Hastings is an exciting, extroverted person who enjoys adventure and giving to others. He is also heavily involved in politics and makes large charitable contributions on a regular basis. As an entrepreneur, Hastings has a long, impressive history of success. However, he has been heavily criticized in 2011 for his drastic business decisions involving Netflix and Qwikster. Watching such a prominent industry, company, and CEO rapidly adapt to uncertainty in real time has arguably made this project much more interesting for our group.
Personality:
Reed Hasting is a powerful, self driven, ambitious entrepreneur that has turned a small idea into a billion dollar company. His motto, “do a few things well” has led him to great achievements today (Yager). Reed takes a different approach to success by being aware of the importance of time. As an entrepreneur, Reed had to be precise when choosing the right timing to start his company and give the world a new option of renting movies. Reed is a high achiever and believes Netflix will continue to grow as years go on. Reed also shows high self-efficacy by his confidence in his company. He is not threatened by competing companies, such as, Apple, Amazon, and Google, because they are such big companies that offer many broad features. Reed believes that because Netflix only focuses on DVDs and online
streaming, they will always have an upper hand and offer customers better service (Reed).
As a philanthropist, he is concerned with helping others. Reed served as the president of California’s State Board of Education and now works with Digital Promise, an organization striving to build an education technology market. Their goal is to boost student achievement in the U.S. by integrating technology in and out of the classrooms (Arne). Reed’s goal is to dedicate his time and efforts to serve the community by concentrating on education K-12 (Education).
In using the “Big Five” personality traits, Reed encompasses relatively high forms of all five traits. These traits include emotional stability, extraversion, openness, agreeableness, and conscientiousness. As the CEO of Netflix, it is important to exemplify these behaviors at work for the success of his company. According to the “Big Five” traits, emotional stability is a quality needed to be a top performer in customer service. Extroversion is also a crucial trait to have when being in management because it measures a person’s attitude with society. Reed is a strong extrovert who inspires people to follow a good idea when they see one. In addition, Reed’s openness to experience is illustrated by his life story. He volunteered in the Peace Corps and Marine Corps, which show that he has a passion to serve others while having the openness to leave his comfort zone and experience new cultures (Yager). Reed’s conscientiousness is measured through his decision making every day. He is aware that in business, there is a buildup of momentum for a new idea and if he does not act quick enough it could be easily gone. He is very conscious of time, technology, and the way society works. Reed also shows to have agreeableness through his ongoing effort to serve others. He continues to work to better education. These traits make Reed a great leader and contribute to the growth of his company.
Reed’s personality characteristics illustrate that he has internal locus of control. Reed believes he can control what happens to him and his company if he continues to make intelligent decisions. He knows that in the science of business it is crucial to always think ahead and be conscious of the importance of time (Reed). Reed also demonstrates to be a high self monitor. After the rise in prices for membership, Reed was attacked by many customers who felt betrayed and lied to because of his lack of communication. Judging by the situation, Reed knew he had to make amends and apologize to his customers. He took the initiative to send out personalized apology letters to each of their customers and also made a video of apology for everyone to watch (Explanation).
Values:
Over the years, Reed Hastings has implicitly identified several of his personal values through his life decisions. After college, he demonstrated how important national security and service are to him by serving in the Marine Corps. Although the Marine Corps ultimately did not suit his skeptical nature, Hastings was still “very interested in serving” and enlisted in the Peace Corps to help accomplish their mission of promoting world peace and friendship (Zipkin).
Just two years removed from graduate school, Hastings founded Pure Software in 1991. It grew into one of the top 50 software companies in the world, but the young CEO was not satisfied with what he called his “mediocre” performance (Yager). After selling the company for $750 million, Hastings demonstrated his extreme ambition by reinvesting the money in an attempt to revolutionize the movie rental industry.
As Netflix CEO, Hastings values responsibility and honesty. This is especially evident in his public response to the negative customer feedback in the third quarter of 2011. After Netflix subscribers expressed their dissatisfaction and confusion with the introduction of Qwikster, Hastings took personal responsibility for failing to explain the decision earlier. He apologized for what many Netflix members felt was a breach of trust, and committed himself to correcting the problem.
Motivation:
“That restless, slightly paranoid attitude, combined with a Steve Jobs-like perfectionist streak, is what sets Hastings apart, he's a hero of mine, as a human and as a leader, Reed was ahead on the technology curve with the DVD and completely changed an industry."-Kleiner Perkins partner John Doerr
In 1991, long before Netflix and when Blockbuster was still the industry leader, Reed Hastings founded Pure Software. His first startup was based on a debugging tool for engineers, managed to double its revenue every year, and went public in 1995. Hastings quickly went from being a rookie entrepreneur to being a CEO and having to learn management skills on the fly. Hastings said he was “underprepared for the complexities and personalities” involved in such a high-level management position (Sauer, 2010). In 1997, Pure Software was acquired by Rational Software for $750 million, which provided Hastings with the capital to start Netflix, the pioneer DVD rental service.
At its inception, Netflix was quickly dismissed by skeptical critics. In January 2005, Wedbush Securities stock analyst Michael Pachter called Netflix a "worthless piece of crap." He put a price target of $3 on the stock, at the time trading around $11. The doubters thought Blockbuster, Wal-Mart (WMT), or Amazon (AMZN), with their economies of scale and established customer bases, would simply destroy Netflix" (Copeland, 2010).
Hastings used this comment to motivate himself and others at Netflix, “A black poster emblazoned with Pachter's photo and his "piece of crap" comment hangs outside a kitchen at Netflix today.” (Copeland, 2010).
Hastings’ personality has helped to make him a very successful Silicon Valley entrepreneur. He has been called a visionary, someone who thinks about the future and is capable of making tough decisions. Hastings keeps the decline of AOL as a reminder to be willing to adapt before it’s too late, “Hastings knows a similar fate could befall Netflix if it couldn’t find a way to shift its 10 million subscribers from DVD to streaming”. (Copeland, 2010).
Hastings also has an ambitious focus for the long-term goal of Netflix, which shows he and his company have a high need for achievement. Hastings also has a high-risk threshold, as he did something that most CEOs would not do, write a letter of apology to its subscribers. He wrote this letter after coming under intense fire for raising Netflix subscription prices and some say that he should have done this earlier. His decision to raise prices and split up the company run parallel with what he feels is in the best interest for Netflix; to become a company that transforms the entertainment industry, like HBO, “We want to be ready when video-on-demand happens. That’s why the company is Netflix, not DVD-by-mail” (Sauer, 2010).
The Netflix corporate feel is different than most other companies. The corporate workplace structure reflects Hastings’ leadership style, as well as the values personal motivators that have helped make him so successful. Hastings and Netflix made public a PowerPoint presentation entitled “Freedom and Responsibility Culture”, which describes the corporate policies including no vacation policy, and lots of employee freedom and responsibility. This atmosphere tend to result in very hard-working employees with a high sense of affective commitment to the organization.
Hastings obviously has a high need for achievement, a main need in McClelland's Theory, being a successful entrepreneur with his first company Pure Software, as well as his most successful company, Netflix. However, Hastings is not like the typical high achiever with the desire for moderate risk, as he has taken many risks, most recently being the decision to split the DVD and Streaming sections of Netflix into separate companies. Hastings single-handedly changed the movie and entertainment industry with the rapid rise of Netflix, driving Blockbuster and similar stores out of business. He is aware that the future is in streaming, even if the DVD-by-mail section of Netflix is still extremely successful. Hastings' decision and apology statements have come under intense scrutiny in the media, but time will tell if this was the right decision to make.
At Netflix, Hastings and his executive staff motivate employees by using Theory Y to manage employees. Netflix expects its employees to work hard, give over 100% and strive to succeed as much as they can. Netflix also does not put an emphasis on job titles (except for at the top), and it does not give employees a finite number of vacation days. This gives an incredible amount of trust and responsibility to the employee, further promoting Growth, in Alderfer's ERG Theory.
Leadership, Culture, Ethics [VIDEO]:
Decisions, Power, Performance [VIDEO]:
What you don't know about Reed:
In an interview for 60 Minutes, Reed Hastings claimed that he was inspired to start his company after misplacing a VHS that he had rented (Yager). He was too afraid to tell his wife about the lost tape, six weeks passed, and he was charged a $40 late fee. It was later that week while on his way to the gym that the thought occurred to him: movie rental companies should act like gyms- charge consumers a monthly fee that would allow them to use a given movie for however long they desired. As the DVD grew in popularity, so did Hastings' confidence in his idea. He believed he could capitalize on the compact size of the media coupled with his ‘gym membership’ idea to create a completely new kind of company: Netflix.
Hastings on entrepreneurship: “Once you have hitchhiked across Africa with ten bucks in your pocket, starting a business doesn’t seem too intimidating” (Boyle 2007).
Netflix and Qwikster were the subject of a recent Saturday Night Live parody sketch. Jason Sudeikis played the part of Reed Hastings.
References:
For the Video Part 1 Reference Page click on this file...
"Arne Duncan and Reed Hastings: A Digital Promise to Our Nation's Children - WSJ.com."Business News & Financial News - The Wall Street Journal - Wsj.com. Web. 06 Oct. 2011. <http://online.wsj.com/article/SB10001424053111903927204576575101438816300.html>.
Boyle, M. (Interviewer) & Hastings, R. (Interviewee). (2007, May 23). Questions for... Reed Hastings [Interview transcript]. Fortune Magazine. Retrieved October 6, 2011 from http://money.cnn.com/magazines/fortune/fortune_archive/2007/05/28/100034248/index.htm
Copeland, M. V. (2010, November 18). Reed Hastings: leader of the pack. Fortune Magazine. Retrieved October 6, 2011 from http://tech.fortune.cnn.com/2010/11/18/reed-hastings-leader-of-the-pack/
"Education Secretary Arne Duncan and Netflix Founder Reed Hastings Announce “Digital Promise”." WiredAcademic. Web. 06 Oct. 2011. <http://www.wiredacademic.com/2011/09/education-secretary-arne-duncan-and-netflix-founder-reed-hastings-announce-digital-promise/>.
"Explanation and Some Reflections - YouTube." YouTube - Broadcast Yourself. Web. 06 Oct. 2011. <http://www.youtube.com/watch?v=c8Tn8n5CIPk>.
Hastings, R. (2009). Proceedings from Netflix culture: Freedom and responsibility. Retrieved October 6, 2011 from http://www.slideshare.net/reed2001/culture-1798664
Hastings, R. (2011, September 18). An explanation and some reflections. Retrieved October 6, 2011 from The Netflix Blog at http://blog.netflix.com/2011/09/explanation-and-some-reflections.htm
Netflix. (n.d.). Management. Retrieved October 6, 2011 from https://signup.netflix.com/Management#rhastings
"Reed Hastings, ASU SkySong Education Innovation Summit Keynote - YouTube." YouTube - Broadcast Yourself. Web. 06 Oct. 2011. <http://www.youtube.com/watch?v=9D6hx_S5KwI>.
Sauer, P. (Interviewer) & Hastings, R. (Interviewee). (2005, December 1). How I did it: Reed Hastings, Netflix. [Interview transcript]. Inc. Magazine. Retrieved October 6, 2011 from http://www.inc.com/magazine/20051201/qa-hastings.html
Yager, J. (2006, December 13). Untitled [Television series episode]. 60 minutes. New York, NY: CBS Corporation. Retrieved October 6, 2011 from YouTube at http://www.youtube.com/watch?v=K3GzO2_NFfQ
Zipkin, A. (Interviewer) & Hastings, R. (Interviewee). (2006, December 17). Out of Africa, onto the web. The New York Times. Retrieved October 6, 2011 from http://www.nytimes.com/2006/12/17/jobs/17boss.html